Temporary lacuna

Sorry I've gone quiet again.

Although I work in the energy industry, my greatest passion (policy-wise) is the perversity and cruelty of welfare policy and the overwhelmingly negative effect it has on our economy and the wellbeing of those it affects, rich and poor alike.

I was recently lucky enough to sit next to Shaun Bailey, and chat to him about welfare issues. Shaun's descriptions of the follies of welfare policy are powerful and authentic. However, for me, he has not yet followed his diagnosis through to the logical prescription: Basic Income plus Flat Tax (BI+FT).

I have been planning for some time to put together a website to set out a political programme, to be called Freedom and Responsibility, based on Austrian, classical-liberal, individualist principles, in which a BI+FT approach is a central plank. The conversation with Shaun motivated me to get on with it. That is what has been distracting me from Picking Losers. It may take some time (although I have already programmed the system that allows you to compare the outcome of the current system and a BI+FT system for your household's disposable income over a range of earnings).

In the meantime, here are a couple of gems that I gleaned as I updated myself on our current welfare system (I first got into the tedious detail while lying in bed with a ruptured Achilles and watching the Tory party conference on TV around 3 years ago - ah, those were the days...). You may already be aware of these, but they exemplify for me the stupidity and perversity of the current system:

  1. When calculating entitlement to Pension Credit (a top-up to the State Pension for those with little additional income), the state takes account of the amount of savings that the pensioner has. The basic Pension Credit can be worth upto around an additional £1800. If the pensioner has more than £6000 of savings, the Pension Credit is reduced on the basis that each £500 over the £6000 will yield income of £1/week (i.e. £52/year). So the government, whose policies have been primarily responsible for the fact that you are doing well to get over 1% interest on a savings account, treats pensioners as though they get over 10%. When did anyone last get 10% on a savings account? If you were on a modest wage, would you bother saving more than £6000 (which would contribute under £100/year to your income at the moment) for your retirement, faced with this extraordinary disincentive? 
  2. If you are unemployed and receiving Jobseekers Allowance (JSA), and find a part-time job paying over £2600 p.a. (for contributions-based JSA, zero for income-based JSA), your JSA will be reduced by £1 for every £1 that you earn. That is a 100% marginal effective tax-rate! You will be no better off earning £5000 p.a. than you would have been if you earned £2600 p.a. (and in fact worse off for some, once one takes account of other benefit withdrawals). There are also ridiculous penalties under the JSA for savings, given current savings rates. It has made little sense for quite some time now for low-medium earners to put money away for a rainy day - the government will penalise them for it until the money is gone.

The mindless, heartless stupidity of it makes me seethe. As does the equal stupidity of commentators who allow that Brown and Balls, the architects of our dysfunctional system, are either intelligent or compassionate. They are clever in the art of intimidatory politics, but utterly unintelligent, verging on sociopathic.